27 July 2020 – The FICC Markets Standards Board (FMSB) has today published a Spotlight Review which examines remote working risks in FICC markets.
Following COVID-19 being declared a global pandemic and the closure of many offices, FMSB formed a working group of members and other interested market participants to consider the impacts of financial services activities being undertaken by a workforce which is widely distributed and using remote working.
The working group set about identifying and capturing the main priorities from a wide range of risks that arise from the new working environment, with a focus on areas which impact the fairness and effectiveness of wholesale FICC markets, and then to consider mitigants or strategies to manage these risks.
As part of this, FMSB has created a risk register that shares the experience and observations of the working group for market practitioners to use when conducting their own risk assessments.
The Review categorises risks into nine thematic categories:
- Control limitations
- Execution risks
- Heightened cyber risk
- Sales lifecycle
- Sharing of confidential information
- Staff treatment and productivity
- Third party risk
- Threats to market effectiveness
Within these nine categories, the risk register outlines over 40 specific risks, including cultural leakage and reduced employee engagement, weakened control of confidential information, poorer identification of suspicious trading activity, and physical and mental stress resulting from home office environments. For each risk there is an outline of the potential impact and example control and mitigation measures.
The risk register is already being used by members of the working group in considering how they should best deal with the challenges posed by remote working. FMSB may decide to issue subsequent iterations when it considers there are substantive changes that would be helpful to share.
Rosie Murphy Williams, Chair of the FMSB Remote Working Risk and Controls Group and former Chief Compliance Officer of several trading platforms and financial institutions said: “It has been impressive to see this group of market participants come together and pool their collective view of the most significant risks arising from the COVID-19 pandemic and the rapid adoption of remote working practices. I am certain that the resulting risk register will prove incredibly valuable to firms across the financial services sector, regardless of business model or location.”
Martin Pluves, CEO of FMSB said: “The rapid transition to widespread and prolonged remote working presented significant new challenges for all participants in wholesale FICC markets. It would appear that remote working in one form or another is here to stay and each firm must navigate its own unique set of challenges. FMSB’s risk register, the product of a diverse group of practitioners, provides practical considerations to help firms with the task of identifying and mitigating risks during this ongoing period of significant change.”
This Spotlight Review captures the main priorities from a wide range of risks that arise from the new working environment, with a focus on areas which impact the fairness and effectiveness of wholesale FICC markets, and considers mitigants or strategies to manage these risks.
This Spotlight Review includes a risk register that shares the experience and observations of the working group for market practitioners to use when conducting their own risk assessments.
Notes to Editors
1) The Fixed Income, Currencies and Commodities Markets Standards Board (FMSB) is practitioner led, funded by members and operated by the major participants in wholesale markets to improve standards of conduct in wholesale fixed income, currencies and commodities (FICC) markets. It aims to bring transparency to grey areas in the wholesale FICC markets by identifying emerging vulnerabilities, clarifying and documenting practice and agreeing standards to improve conduct and market behaviour. Ensuring that wholesale FICC markets are transparent, fair and effective for all participants is at the heart of FMSB’s mission.
FMSB Standards set out Core Principles and accompanying guidance on the most important aspects of practice where ambiguity risks undermining the transparency, fairness and effectiveness of markets.
FMSB Statements of Good Practice set out clear expectations and guidance on good practice in relation to broader areas of uncertainty in wholesale FICC markets.
FMSB Spotlight Reviews encompass a broad range of publications used by FMSB to illuminate important emerging issues in FICC markets. Drawing on the insight of members and industry experts, they provide a way for FMSB to surface nascent challenges market participants face and may inform topics for future work. Spotlight Reviews will often include references to existing law, regulation and business practices. However, they do not set or define any new precedents or standards of business practice applicable to market participants.
All FMSB publications are available on the FMSB website at fmsb.com/our-publications/.
2) Setting up the FMSB was one of the main recommendations from the Fair and Effective Markets Review (FEMR), which was conducted by HM Treasury, the Bank of England, and the Financial Conduct Authority.
FEMR set FMSB four strategic goals:
- Identifying global market vulnerabilities through scanning the horizon for emerging business practice risks.
- Developing best market practice through the production of standards and other materials that create a common understanding.
- Driving global adherence through ensuring standards are comprehensible and practical.
- Developing consistent approaches to market practices through identifying gaps and inconsistencies in existing regulatory standards and working with other standards setting bodies.
3) FMSB has a Standards Board drawn from senior executives from across wholesale markets, from corporate clients, asset managers, sell-side participants and intermediaries and infrastructure providers such as exchanges and custodians. In specialist, focused committees, sub-committees and working groups, industry experts debate issues and develop FMSB Standards and Statements of Good Practice, and undertake Spotlight Reviews that are made available to the global community of FICC market participants and regulatory authorities.
4) FMSB members bring together sell-side investment banks, buy-side asset managers, market infrastructure providers and exchanges, custodians and users of the market such as corporates. This constitution is unique.
The member firms are listed on the FMSB website at fmsb.com/who-we-are/.